31 Oct 2008

Railways Reloaded

Let's say you wanted to wanted to make the Indian Railways more efficient. How would you do that? Here are some ideas:

Market Pricing

Price tickets based on demand rather than first-come, first-served. This is just the market principle and is more economically efficient. So tickets on busy days would cost more. People who want to travel cheap can choose an alternate day. The Railways has something like this in the name of Tatkal, where you can pay an extra fee for higher priority. Make that more fine-grained, and allow all seats to be priced based on demand. You should be able to book a ticket anytime for travel on any day, for a price.

The Railways, being a bureaucracy, won't be able to decide these fares. So let them outsource that to the market -- have the Railways sell seats in bulk to retailers (online and traditional) who will price them according to demand and share the profit with the railways.

Some of this extra money could be used to upgrade facilities or subsidize fares for the cheapest travel class.

Longer Trains

When there's too much demand on a certain day, add extra coaches that will overshoot the platform length, and give people an option to board them. Something like "Sorry, all on-platform seats are taken. Would you like to take a coach off the platform?" Or, even if a few on-platform seats are available but in demand and expensive, some people may want to save money and take an off-platform seat.

This may be shocking to westerners, but in a poor country like India, many people would like that, rather than traveling packed like goats or sitting on top of the train in extreme cases. Basically, this amounts to saying travelers can choose worse service for less money, and that is a good thing.

The software can be smart, since railway stations can be of different lengths. Say the normal train length is 18 coaches -- that's guaranteed to be on platform at every station. But if I'm going from Bangalore to Hyderabad, both of which can accommodate 24 coach trains, I would like to be given this information so that I can make my trip while boarding and alighting on platform.

The ideal being that you can book your ticket just 24 hours before the train starts, or even, in some cases, go to the platform and then book your ticket. The railways already has a wait list, so it's easy to issue as many tickets as people want and, whenever the length of the wait list exceeds the coach capacity, add another coach (and another engine if needed).

In addition to allowing more people to travel on busy days, allowing the market to make trains longer than usual could mean fewer trains overall, which translates to fewer time wasted to contention when there are a lot of trains and limited number of tracks. Not to mention that longer trains on busy days relieves pressure on roads, where traffic can sometimes grind to a halt for hours.

Longer trains also give people the option of taking an off-platform seat in a faster train and saving a couple of hours compared to an on-platform seat in a slower train. And that is really good -- some people value time over convenience, and others not. Let everyone make whatever choice is best for them.

Distribution of coaches across travel classes can also be outsourced. If a train has to have 18 coaches, say, how many of them should be second class, how many AC 3-tier, how many AC 2-tier and so forth? If an AC coach costs x% more than an ordinary one, and there are enough people willing to pay for the upgrade, then the train should have one more AC coach and one fewer ordinary one. Basically the railways can leave this decision to the market. Allocate coaches to maximize profit per train.

Does this mean that when the railways builds new coaches, it should construct more AC coaches? Once again, resource allocation can be left to the market -- instead of the railways buying any coach, let it lease them from third parties who actually own them. So when the railways needs a coach for a train, it will lease it from the cheapest coach provider for that class of coach. And if a certain class, say AC, is in great demand, the lease rates will rise, and coach providers will build more coaches of that class. That way, the decision of how many coaches to build for each class is done by the market instead of the railway bureaucrats.

Another fact of life currently is that one has to choose between a fast train that stops at fewer stations and a slow train that stops at many stations. But does it make economic sense to add another engine so that we can eat our cake and have it too?

I'm sure there are many other ways to improve things... if only someone took an interest.

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